The Age-Old Surplus Inventory Problem
A project is cancelled. You are offered a significant discount for a bulk order of products you may sell over the year. Your warehouse is full, your cash flow could really benefit from the dispersal of the excess inventory. The economy has crashed, government subsidies have been discontinued, or maybe the business was just too busy and not managing purchases correctly. All these scenarios and more can result in the dreaded surplus inventory problem.
As much as anyone in any industry from manufacturers right on down to the contractors would like to tuck it away in the back corner of the warehouse they simply can’t. That surplus inventory can end up being a costly business issue anyone involved in the supply chain can face today. The cost of the products themselves, the loss of working capital and the ongoing holding costs are just a few ways that surplus inventory can make or break the bottom line.
According to different statistics this number is in the Billions in Canada, that right Billions. The issue is more prominent in areas with a downturn in the economy. That inventory that used to flow through the business is suddenly squeezed off and the cash flow from it can stop almost overnight!
The magnitude of the problem then requires business owners immediate and dedicated attention. In a weak highly competitive economy, businesses must find ways to avoid, identify and sell surplus inventory.
Avoid surplus issues
Obviously, the best way to eliminate the cost of surplus inventory is to avoid it all together. Industrial distributors know that's often easier said than done. By reacting quickly to accurate customer and vendor intelligence, improving the procurement and inventory processes, and changing ineffective processes and procedures, you can succeed in avoiding some level of surplus inventory.
As with any issue, industry must begin by determining where within their organization the simplest and immediate steps to avoid surplus inventory. A fully integrated website that quickly and easily displays sales and trends for inventory is the best tool in the fight against surplus inventory. One that also has the capability to market surplus inventory across an entire country or continent will certainly help. This data mining is an essential tool not only to avoid surplus inventory, but one in which can be even more valuable for the dispersal of said inventory!
Identify Surplus issues
Every business knows that surplus inventory exists; finding that surplus can sometimes be a challenge. Some likely causes for surplus inventory include the loss of a customer or supplier, a new competitor, the end of a season or product lifecycle, or an internal consolidation or branch closure. Distributors need to prioritize their surplus inventory by shelf life, aging, investment value and turnover. Closely examine trends. For example, management issues might cause problems with inventory location while training issues might contribute to surplus inventory.
Remember the following when identifying and attempting to control surplus inventory.
Once you identify your surplus inventory, determine what quantity you need. Use data mined from sales history and forecasts to determine quantities needed to support sales and adjust. Consider short-term supply needed to fulfill expected orders that occur on a monthly basis.
Eliminate surplus inventory
Remember purchased inventory is a "sunk" cost. It's paid for, and no matter what it's worth now, the money's still gone. Once surplus inventory exists, businesses must find ways to recoup as much of the cost as possible.
Some businesses with multiple locations across large geographical areas may have opportunity to redistribute inventory in house. Although freight costs are incurred this may be the best solution. Many times, in a region with a downturn in the economy surplus is literally almost given away!
Explore any and all avenues for selling the surplus. In most cases if the region is indeed in an economic downturn this can become a daunting task. Auctions may not attract buyers willing to pay much for the surplus and can result in very poor returns. Surplus clearing warehouses in the region will be bursting at the seems and can not afford to pay much for the surplus. They may not even want the surplus as they may also have surplus inventory issues. Yes, even the largest surplus dealers can find themselves with surplus inventory problems!
As a last resort, surplus items can end up in landfills, be donated to a charitable cause or sold for recycling recovery. Not a scenario particularly good for any businesses bottom line!
The best scenario would be if the business could sell the surplus for a reasonable return at a reasonable cost. If they could access markets that may have demand for the surplus. If they could also target industry specific buyers at all levels of distribution all the way down to the end users. In Canada the perfect solution is currently under operation for the electrical industry and in development for many more!
Surpluselectrical is Canada’s first Multivendor Marketplace that offers this truly innovative solution for the electrical industry. The model and base marketplace is then duplicated by Surpluscentral and offers many other industry professionals the same opportunity to own this incredible solution. They offer this innovation at an affordable cost, turnkey and ready to do business in just 12 weeks!
Wait, it gets even better. All the marketplace solutions will be sold utilizing a hybrid franchise sales agreement. Much of the marketing will be centralized drawing thousands of users to the industry specific surplus family marketplaces. All marketplaces will be customized, owned, and operated by industry professionals each featuring their respective industries. Surpluscentral will always remain as the head of the family for overall searches and will have direct API access for data mining providing invaluable management data to all marketplace owners.